1. By this reference under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), the Income-tax Appellate Tribunal, Indore Bench, has referred the following questions of law to this court for its opinion :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in concluding that the share income or interest income of the minors can be clubbed in the hands of the assessee Under Section 64(1)(iii) notwithstanding that there is no nexus between the admission of minor to the partnership and their subsequent voluntary deposits from time to time in the firm ?
2. Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in holding that although minors' income would be clubbed in the hands of the assessee by the fiction created by Section 64(1)(iii) of the I.T. Act, 1961, yet the advance tax paid by the minors cannot be adjusted towards the tax assessment when the minors' income is below the taxable limit ?'
2. The material facts giving rise to this reference briefly are as follows :
The assessee is assessed in the status of an individual and the assessment year in question is 1976-77. The ITO held that the interest earned by the two minor sons of the assessee on the amounts standing in their capital account with the firm, M/s. Pramod Kumar Narendrakumar & Brothers, of which the minor sons of the assessee were partners, was includible in the income of the assessee by virtue of the provisions of Section 64(1)(iii) of the Act. On appeal, the AAC affirmed the finding of the ITO. On further appeal, the Tribunal rejected the contention advanced on behalf of the assessee that the minor sons of the assessee had received interest on loans advanced to the firm in question by the minor sons of the assessee. The Tribunal further held as follows ; 'On the facts narrated above, and looking to their capital accounts, it is clear to us that the contributions made by the minors were treated as their capital just as the contributions made by the major partners were treated as their capital. There was no separate account maintained in the books of the firm to show the deposits of the minors.'
3. Thus, the Tribunal, having found that there was capital contribution of the minor sons of the assessee, held that the ITO was right in including the interest earned on the capital contribution made by the minor sons of the assessee admitted to the benefits of the partnership, in the income of the assessee, who was their father. The Tribunal also rejected the contention advanced on behalf of the assessee that the assessee could claim the benefit of the advance tax paid by the minors on the amount of interest earned by them. In this view of the matter, the Tribunal dismissed the appeal preferred by the assessee. Aggrieved by the order passed by the Tribunal, the assessee sought a reference and it is at the instance of the assessee that the aforesaid questions of law have been referred to this court for its opinion.
4. Now, so far as question No. 1 is concerned, that question, in our opinion, does not arise out of the order passed by the Tribunal. The Tribunal has not found that the minors had made deposits from time to time in the firm and that there was no nexus between the admission of minors to the partnership firm and their deposits in the firm. The Tribunal found that the minor sons of the assessee had made contributions towards the capital of the firm and had received interest in that behalf. In view of the finding of the Tribunal, the question referred to this court by the Tribunal does not arise out of the order passed by the Tribunal and we, therefore, decline to answer that question.
5. As regards question No. 2, learned counsel for the assessee was unable to point out any provision of the Act by virtue of which the advance tax paid by a minor son could be adjusted towards the tax liability of the father when the minor son's income was below taxable limit. The Tribunal rightly observed that it would be for the minor sons of the assesses to apply for refund of advance tax. Our answer to question No. 2 is in the affirmative and against the assessee.
6. In the circumstances of the case, parties shall bear their own costs of this reference.